Photographer: Andrey Rudakov/Bloomberg

Metals Tycoon Plots Biggest Russian Share Sale Since Crimean Crisis

  • Aluminum producer in talks with banks to sell 20% stake
  • ‘Big window of opportunities for Russian companies,’ BCS says

United Co. Rusal, the aluminum giant led by billionaire Oleg Deripaska, is laying the groundwork for the biggest Russian share sale since the Crimean crisis.

Rusal’s executives and bankers have discussed selling up to a 20 percent stake, representing about $1.7 billion, in London, according to two people familiar with the matter. If successful, it would be the surest sign that international investors are losing their post-sanctions inhibitions about Russia.

“There is a big window of opportunities for Russian companies,” Kirill Chuyko, an equity strategist at BCS Global Markets, Moscow’s largest brokerage, said by phone. “Rusal and others are in a rush to take the hot money as the window may close soon if geopolitical tensions come back."

The plans are still preliminary and haven’t been submitted to the board, which would need to approve the decision. Rusal’s board hasn’t considered or discussed any secondary public offering of shares, according to a statement Friday to the Hong Kong stock exchange, where the company has a listing.

Still, it shows that investors are regaining confidence in Russia as metal prices rebound and U.S.-Russian tensions ease. President Donald Trump has touted the benefit of a better relationship with President Vladimir Putin -- a reversal from previous policy that penalized Russia for annexing the Ukrainian region of Crimea in 2014 and supporting separatist rebels.

Seperately, Onexim Holdings Ltd., owned by billionaire Mikhail Prokhorov, is considering selling a portion of its Rusal stake through an accelerated book building, people familiar with the situation said, asking not to be identified because information is not public.

Onexim has been looking for a buyer for its 17% Rusal stake since summer. It might sell 5 percent through the accelerated book building, one of the people said.

Raising Cash

This week, several Russian companies have moved to sell bonds and shares. For example:

  • Severstal PJSC, Russia’s largest steelmaker by market value, sold $250 million of convertible bonds with zero coupon. 
  • PhosAgro PJSC, a fertilizer producer, said its owner raised $251 million by selling a 4.5 percent equity stake to investors. The offer book was covered in just about an hour, according to VTB Capital.

Since December, Novolipetsk Steel PJSC, TMK PJSC, PhosAgro and Detskiy Mir PJSC are set to raise about $900 million by selling shares.

Rusal shares fell as much as 3.5 percent to 317.10 rubles in Moscow, reversing earlier gains. In dollar terms, the Russian-listed shares are up 85 percent in the past year.

London Lure

The choice to sell shares in London underscores Deripaska’s view of the city as a capital center even as the U.K. works to leave the European Union. En+ Group Ltd., the commodities business that Deripaska controls, is also planning to go public in London this year.

"Brexit only will reinforce the British platform. It will be more competitive," the billionaire said in a Jan. 19 interview from Davos, Switzerland.

Rusal, which had $8.8 billion in total debt at the end of the third quarter, is seeking to reduce borrowing. On Wednesday, it announced plans to sell $1.5 billion of yuan-denominated panda bonds after raising $600 million in its debut Eurobond last month.

The share sale may reduce net debt by 25 percent, according to a report by Oleg Petropavlovskiy, an analyst at BCS Global Markets.

Rusal may also use the funds to purchase the stake owed by billionaire Mikhail Prokhorov’s Onexim, who is seeking to sell, said George Buzhenitsa, an analyst at Deutsche Bank AG. Andrey Belyak, a spokesman for Onexim, declined to comment.

Prokhorov’s company has been in talks with fellow billionaire Viktor Vekselberg-led Sual Partners to sell 12 percent of Rusal since last year, but the deal stalled after the share price increased, Vedomosti reported this week.

Any share sale of this size will also need the biggest shareholders content as the stakes will be diluted. While Deripaska controls about 48 percent in Rusal, Prokhorov holds 17 percent and Vekselberg and partners - about 16 percent. Prokhorov’s and Velselberg’s representatives declined to comment.

Rusal already was weighting similar shares sale in 2011, but didn’t proceed with the deal.

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